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The Two-Way

10:07 am

Wed November 2, 2011

Pakistan Gives India 'Most Favored Nation' Trade Status

Indian Border Security Force soldiers (in khakhi) and Pakistani Rangers (in black) perform the daily retreat ceremony at the India-Pakistan border in Wagah. It's hoped that freer trade will reduce tensions between their two nations.

Narinder Nanu AFP/Getty Images

The news today that Pakistan's cabinet has moved to normalize trade with India — giving its neighbor "Most Favored Nation" status — is being viewed as a positive first step toward the possible normalization of diplomatic relations between the two nuclear rivals.

The designation will allow Pakistan and India to trade on equal terms, typically giving each other low tariffs and high import quotas. Pakistan had previously linked trade liberalization to a settlement in Kashmir, the disputed territory over which the two countries have fought two wars.

Several banned militant groups oppose Pakistan's move in view of the presence of the Indian army in Kashmir. And the decision is likely to earn the ire of right-wing religious forces in Pakistan, who are strongly opposed to normalization of relations with India.

But Pakistan's Information Minister said that "after an extensive briefing ... the cabinet unanimously" granted India most favored nation status. India had already extended it to Pakistan.

Last month the two countries agreed to double their trade to $6 billion in the next three years. Visa restrictions, which have long been a source of frustrations for business leaders in both nations, are also expected to be relaxed in the coming weeks.